The crowdfunding industry is growing and entrepreneurs from all over the world are looking to shake it up. Are you thinking about starting a crowdfunding platform or related business? If you are, then you will need to do your research and due diligence first. There are many different types of companies and providers in the market. Below are some basic questions to ask yourself to get the ball rolling:
Will my business be an actual crowdfunding platform or am I going to provide services related to the crowdfunding process?
If you want to go the route of Kickstarter, IndieGoGo, and the hundreds of other crowdfunding platforms out there, then more power to you. It’s getting crowded and the next generation of websites will have to really innovate in order to stand out. However, the internet has billions of potential crowdfunders and can reach the entire globe, so opportunity is everywhere. Because there are so many different industries and groups, catering to a small and specialized niche may work best at this stage. Or consider “changing the rules” a bit. Right now the main rules for raising money on crowdfunding platforms are “all-or-nothing” and “keep everything”. But maybe there is a way to mix it up and create a new format that makes the process easier, safer, or more enjoyable.
Other possible crowdfunding businesses include advice and planning services. Similarly, there are already attorneys and financial professionals carving themselves a niche within the crowdfunding industry. There are also project and campaign management companies that will set up, promote, and run your project for you for a fee. Other ideas include informational resources that provide creative crowdfunding guidance, tips, and due diligence services. There are even online stores that handle the ordering and fulfillment of crowdfunded products.
Should I build my platform from scratch or use turnkey crowdfunding software and solutions ?
Dozens of startups have already built sophisticated crowdfunding software and platforms for businesses. They make it easy for you to launch your own branded platform with custom templates, and usually have payment processing already integrated. Examples include templates and themes on WordPress and Shopify: two of the most popular ecommerce solutions. However, you will have to pay fees, and perhaps even a percentage of the funds your crowdfunders raise. It’s obviously a tradeoff and something you will have to consider. Building your own platform will probably save you time and money in the long run, but getting it up and running from scratch is no small feat.
Do I have enough time to do this on my own or do I need a team ?
Crowdfunding requires careful planning, social media skills, technical skills, networking, and time. The consensus among crowdfunders, not surprisingly, is that simply creating a campaign and waiting for people to come to you will fail. The same idea applies to both projects and crowdfunding businesses and services. Just as you need to utilize your own personal network to get your crowdfunding pitch to go viral on blogs and social media websites, you will have to do the same for your platform or service. New platforms are being launched every single day so you need to make a serious effort to stand out. Therefore, expect to have to pay for advertising and marketing your own crowdfunding platform or service. Sure, some individuals have been successful on their own- but these cases are the exceptions rather than the rule. Online crowdfunding- whether in the form of a campaign or actual business- is tough.
What are the legal and compliance implications of starting a crowdfunding business?
You will be raising money, or at least facilitating the process of raising money, potentially from people all over the world where laws vary. It’s not something you want to do without first consulting a lawyer and an accountant. It’s better to be safe and set everything up properly- you don’t want to run into problems down the road. Get it right immediately before your business grows. If you ultimately decide to launch something online, make sure you have the proper technological foundation in place (security, speed, performance, etc.).
These points really just scrape the surface of the crowdfunding world, but hopefully they will get you thinking about what really goes into setting up an online crowdfunding business. Check out our other articles and our resources page for more crowdfunding tips, tools, and advice.